It’s somewhat hard to believe. But in 2010, the pharmaceutical industry eliminated 43,334 jobs. Stop and think about that. Over 40,000 people received the infamous pink slip!
Okay, so you might be thinking, “But that’s pharma. I’m in medical devices. I’m safe.” Think again, my friend. Regulatory timelines are long. PMAs and 510ks are incredibly expensive. Venture capitalists are white-knuckling their cash. Oh yeah, don’t forget about the 2.3% medical device tax and the Sunshine Act.
With that in mind, it’s paramount that medical device marketers and sales people begin to stretch. As in…stretch your mindset. Think outside the box. Employ aggressive, non-traditional avenues. Are you with me? Okay then…
Enter Bob Harrell, VP of Marketing for Appature, a technology company that provides a “surprisingly simple” cloud-based relationship marketing software platform for pharma and medical device companies. Before joining Appature, Bob served as Director of Integrated Marketing at Shire. Bob’s 20 years in the pharma industry began in hospital sales for Merck, followed by field sales for Astra Merck. He then assumed a variety of positions with increasing responsibility at Astra Merck and AstraZeneca headquarters, including Product Communications Manager, Director of Field Communications, and Director of Strategic Communications.
Enjoy our conversation. Better yet, don’t just sit in the audience of life. Employ just one of the principles we discuss and you’ll have a fighter’s chance against the headwinds that face the healthcare industry.
This Is What You Can Do Next
1) You can listen to the interview with Bob Harrell right now:
2) You can also download the mp3 file of the interview by clicking here.
3) Read the following transcripts from my interview with Bob Harrell. Also, feel free to download the transcripts by clicking here.
Interview with Bob Harrell of Appature
Scott Nelson with Medsider.com: You were recently quoted as stating, “The industry can no longer rely on the blunt instrument of mass campaigns to reach customers…” Where are medical device companies missing the boat when it comes to marketing strategies?
Bob Harrell with Appature: Since the 1940s, there has been mass marketing via TV, as well as print and radio, for cigarettes, soap etc., and that was state of the art at the time. Markets were greenfield, consumers were easily influenceable, and mass marketing had a big return.
This was also the case in pharma during the age of the ‘detail men’. That is, men who exclusively educated doctors on the ‘details’ of the product. This was at a time when access to the doctor was easy and sales reps were viewed as the primary and trusted source of information about products. Then came the 90s where we had the sales force arms race. By the 2000s, there was nearly a rep for every valuable doctor in the US. That of course was unsustainable, which is why you’ve seen sales forces decline in the intervening years.
At the same time, doctors got busier, managed care took more control, and technology began to enable self-service for key information about products. So life sciences companies found themselves with a broken model. Sales reps are EXTREMELY expensive when you consider fully loaded costs. And when the number of calls per rep decreases, you end up with a crazy cost per call. Currently, a large portion of docs enforce “no see” policies with sales reps, and most others are very hard to reach. Well over 75% of calls end at the sample closet (no interaction) and only a small fraction result in more than 2 minutes of dialogue. So let’s say the fully loaded cost of a rep is $200-250,000 and they get a total of 9 to 15 minutes a day actually communicating with a target doc. That doesn’t work, except in the cases where 1) Doctors have a legitimate interest in new products (and a knowledge gap exists) and 2) You’re dealing with the most productive/valuable docs (ie. the very top decile or two of Rx writers).
“Sales reps are extremely expensive when you consider fully loaded costs. And when the number of calls per rep decreases, you end up with a crazy cost per call.”
So assuming we still need to have commercial influence with customers to drive market share, what’s the alternative? For the last 10 years, pharma and medical device marketers have been ramping up non-personal (ie. print, direct mail) and digital (ie. web, email, edetail) programs.
This can backfill the rep influence to a certain degree, but not entirely. The truth is that the total ‘pie’ of customer attention and influence has shrunk. We can substitute digital and non personal promotion for rep access in some instances, but the sum total of our influence will still be less – replaced by self-service, managed care edicts, etc.
That means that there is more pressure on margins for pharma and medical device marketing departments. It’s harder to get ROI. Think of it this way: financial services and consumer packaged goods have lower margins (by a long shot) than pharma, but they still have huge marketing budgets. Presumably they are not doing that with a goal of continuously losing money.
What’s different? Well, fundamentally, they have greater sophistication in their marketing capabilities. They use technology, data, 1:1 content and offers, etc. They measure and optimize daily/weekly to squeeze the maximum return out of every marketing dollar.
Bottom line, we have to ask ourselves, as pressures on our business continue to mount, is it reasonable to think that a life sciences marketer – and/or his or her budget – can survive using the blunt instrument techniques perfected in the 1940s through 1980s – when making a profit on an approved product was like shooting fish in a barrel and the internet was still the stuff of science fiction novels?
Scott Nelson: First, I love your comments about the increased cost per call of a pharma and/or medical device rep. In addition, you mentioned that the “total pie of customer attention and influence has shrunk”. With that said, why aren’t more pharma and medical device companies taking advantage of the sophisticated technology we have today?
Bob Harrell: I would say that it is a function of a few different items:
(1) Awareness and/ or understanding, or lack thereof, regarding the changing environment and (2) The fact that this kind of marketing is fundamentally more sophisticated, complex, and dependent on a set of IT/process capabilities that for the most part do not exist in pharma and medical device companies. They haven’t HAD to exist. I joke that John Wanamaker’s famous quote ‘I know I’m wasting half of my marketing budget, I just don’t know which half’ could be adapted to the old days of pharma as ‘I know I’m wasting 90% of my marketing budget, but I just don’t [have to] care.’
But you can’t go from 10 miles/hr in the pace/capability level of your marketing to 100 miles/hr overnight. It’s an evolution – one that requires significant and sustained commitment of people, dollars, and organizational focus. Why should I do it if I don’t see the need for change or if, today anyway, I am still making lots of money – thank you very much – doing it the old way. To that I would say you may be right, but given the lead time to grow this kind of capability and marketing sophistication, you may well find yourself flat footed in 2-3 years, even if things seem okay today.
Remember Wile E. Coyote from the Road Runner cartoons? He would always chase the Road Runner off the cliff, and only when he saw that he was hanging out over mid-air would he realize that he should have taken a left turn 100 yards back. But by then it’s too late. Thankfully for Wile E. Coyote, he could magically regenerate after a fatal fall like that. Not so sure I’d take that gamble as a pharma or medical device marketer today.
Scott Nelson: Will the external market forces – ie. medical device tax, Sunshine Act, decreased reimbursement, etc. – will these forces help pharma and medical device companies “step up their game” when it comes to more sophisticated approaches…approaches that are enabled by systems like Appature Nexus?
Bob Harrell: Precisely. It really is a situation of evolve or die right now. Some commercial people in the industry, both sales and marketing, are still operating under the illusion that things will continue as they have, albeit with a bit less money and a bit more scrutiny . Not true. To use another analogy, you can think of mass marketing as the old days of blunt instruments (cave-man marketer), or sticks and knives (post cave-man marketer). I grew up in Texas, and people there were of course fond of the phrase ‘don’t bring a knife to a gun fight’. Marketers who hang on to the old model of one-size-fits-all, untargeted, non data-driven, non-optimized, non-technology-enabled marketing will find themselves not just unprepared to compete in this era, but fundamentally *unarmed* in an ever increasing war for market share. That’s a bad place to be.
Scott Nelson: I agree with you wholeheartedly. In fact, in 10-15 years, I have a feeling there will be plenty of pharma and medical device marketers that look back and think, “How in the hell did we operate like that?”
In the time we have left, I’d like to discuss some of the challenges that the Appature platform helps to solve. Perhaps you could briefly elaborate on the following challenges/frustrations that pharma and medical device companies face specific to the following topics:
Bob Harrell: Our technology has been designed from the ground up to address the key pain points outlined below. Specifically:
Problem #1: My data is siloed. I can’t establish a complete view of the customer.
Nexus 360 provides a flexible database that quickly integrates all your disparate data sources to create a clean view. It also includes maintenance tools such as MDM (master data management) so that you can very quickly get a 360 degree view of the customer – who they are, what their preferences are (including opt-in and opt-out for customer service and compliance purposes), how you have contacted them, etc. A single version of the truth for every customer.
Problem #2: I’m unable to measure ROI on our marketing efforts. I have no idea how our marketing campaigns are performing.
Nexus Insight enables real-time reporting and analysis on the fly as needed. Easy to configure reports, ability to explore data right at your desktop with a simple user interface (ie. the marketer can do it him/herself, not relying on IT or a marketing service provider), and the ability to easily export a clean feed to your marketing analytics team for deeper ROI analysis through SAS or a similar tool. The other component is A/B testing (which, embarrassingly, most marketing campaigns in pharma and medical devices do not include) that is enabled through a good campaign plan – driven by a database, campaign management engine, and reporting/analysis tool.
Problem #3: We’d like to expand our reach to those ‘hard-to-see’ physicians.
This is fundamentally about planning robust campaigns that contain enough touchpoints to create ‘surround sound’ with physicians. If I don’t reach them through the journal ad, how about search words via SEM? If not that, how about a KOL webinar, or an edetail. What about a microsite within Medscape? Banner ads within online journals or professional association sites? Messages imbedded in starter kits? Content delivered through the sales reps via iPads? Materials we provide to patients (eg. ‘talking to your doctor’ worksheets) that they in turn bring into the doctor visit? I could go on, but those are a few examples.
Problem #4: I want to personalize our messaging and avoid redundancy, eliminate duplicates, etc.
Again, this is dependent on a strong database and campaign management tool. You need to manage opt-in and channel preferences automatically via business rules. Set limits on the number of contacts a doctor or consumer can receive in a given week/month. We already do this with online media/banner advertising via ‘frequency capping’ – so why don’t we do the same thing with our other communications? (Hint: it’s because we’ve had neither the need nor the capability to do so in the past. Appature as a company was built from the ground up to address exactly these kind of gaps.)
Problem #5: How do we “break through the noise” and hear what our customers are saying?
We do not build social media tools into our core product but do integrate with 3rd party tools such as Radian6. This enables us to capture this kind of intelligence and incorporate it into an intelligent database.
Scott Nelson: Great information, Bob. Before we conclude, is there anything you’d like to leave the audience with that we haven’t discussed?
Bob Harrell: Yes, one last point. I think of the current situation in the industry very simply as a ‘marketing maturity curve’. Imagine a graph where the Y-access is pressure on ROI and margins, and the X-axis is channel/customer complexity. As margin/ROI pressures go up, and as customer/channel complexity go up, marketing sophistication must go up as well. In this context low sophistication can be defined, on the low end, as uncoordinated push tactics, and on the high end, as performance-based, data-driven marketing. Historically, pharma has been in the lower left quadrant (low pressure, low sophistication) – the same place financial services and consumer packaged goods industries were with their marketing in the 1960s. Now there truly is a ‘burning platform’ for change for life sciences marketers to move up and to the right on the maturity curve as margin pressures continue to mount. Would be great if it could be easier but it’s just not. Don’t bring a knife to a gun fight. In our business today, it’s evolve or die (or at least atrophy).